LONDON: Brent crude oil fell below $111 a barrel on Monday as fears of another US recession and slowing growth elsewhere raised the prospect of lower demand for fuel.
China’s services sector grew in August at the lowest pace on record, a private survey showed, as new orders ebbed and tightening measures to rein in an exuberant property sector started to pinch.
Global growth in services came to a virtual standstill last month as new business all but dried up, adding to fears that the world economy is facing a double-dip recession.
US jobs data came in worse than expected on Friday, adding to worries about the US economy.
Stock markets and the euro — battered by its government debt crisis — continued to fall on Monday.
Brent futures for October fell $1.80 to a low of $110.53 a barrel, and by 1216 GMT were trading around $111.
US crude futures were down $1.85 at $84.60 a barrel, after falling more than $2 to a low of $84.38. US crude settled $2.48 lower on Friday at $86.45. Volume was relatively light with US markets closed for Labor Day.
"Oil is falling on worries over weak demand, unemployment and talk of a double-dip recession," said Eugen Weinberg, head of commodities research at Commerzbank in Frankfurt.
"Prices are still being supported by speculation that the Federal Reserve may launch a third round of quantitative easing (QE3), but I think the market may be too optimistic on that. The first two rounds of easing did little to support the economy, so why should a third round be of any more help?"
Compounding fears of a recession in the United States, Europe faces a string of political and legal tests that could hit efforts to resolve its debt crisis.
Storm watch
Providing some support for prices was oil companies’ shutdown of more than half the crude production in the US Gulf of Mexico due to Tropical Storm Lee, which is hindering efforts to restaff and restart oil and gas platforms in the basin.
Lee reached Louisiana’s coast early on Sunday, but was moving inland very slowly. High winds grounded helicopters on standby for oil and gas companies that would have otherwise ferried workers out to do post-storm assessments and restaff facilities.
Another storm, Hurricane Katia, intensified over the open Atlantic on Sunday, bulking up to a powerful Category 2 storm, the US National Hurricane Center said.
The Miami-based hurricane center said it was still too soon to gauge the potential threat to land or to the US East Coast with any certainty. But most computer models showed the storm veering on a northeast track out to sea after moving safely west of the mid-Atlantic island of Bermuda later this week.
The European Union imposed a ban on purchases of Syrian oil on Saturday and warned of further steps unless President Bashar Al-Assad’s government ended its crackdown on dissent.
In Libya, forces loyal to Muammar Qaddafi refused on Sunday to give up one of their last strongholds without a fight, raising the prospect of an assault on the town of Bani Walid.
The EU has lifted sanctions on Libyan ports and oil firms, but few expect the country’s normal oil production — around 1.6 million bpd — to be restored soon.
Olivier Jakob, managing director of oil market consultants Petromatrix in Zug, Switzerland said Thursday would be a key day for markets with the meeting of the European Central Bank and a US presidential speech about job creation:
"Global financial markets are still under a lot of stress (if not under increasing stress) and our opinion remains that in this environment a low risk-profile needs to be observed," Jakob said. –Additional reporting by Francis Kan in Singapore
